A brutal reevaluation is being priced into the market as shares of the dominant player in the solar and energy storage sector have nearly halved from their all-time highs. The descent represents more than just a steady decline; it is a complex narrative composed of two distinct phases of valuation compression, each driven by entirely different factors. Market sentiment has regrettably blurred the lines between these two separate negative catalysts, treating them as one massive systemic risk that has dismantled the company's market capitalization.
The first phase of the sell-off was rooted in the anticipation and subsequent correction of the company's fundamental growth expectations. In the seven months leading up to the peak, the stock price surged from 51.76 yuan to 209.88 yuan, a near fourfold increase that reflected a premium for the overseas energy storage business as a promising second growth curve. While the full-year figures for 2025 demonstrated substantial growth, with energy storage system revenue reaching 37.287 billion yuan (up 49.39% year-on-year) and overseas revenue climbing to 53.992 billion yuan, the market's exuberance proved fragile. The stock began a correction of nearly 25% even before the annual report was released, and when the actual profit fell roughly 7% short of market consensus, it triggered a single-day plunge of over 10% and a crushing blow to investor confidence.
The second phase of the sell-off, beginning in late June, was driven by geopolitical policy fears. Following reports that the US was preparing restrictions on foreign inverters, the stock price experienced severe volatility, including a nearly 14% drop in a single day. When an executive order was signed in late August, shares tumbled more than 12% again. This time, the market's concern shifted from earnings quality to the company's ability to conduct business in the United States and sell newly developed products there. The situation is complex because the policy's target is the 69kV and above main grid, which includes substations, inverters, storage systems, and industrial control systems.
The immediate question is whether the market has become excessively pessimistic, especially given that the company generates 15% to 20% of its revenue from the US. In contrast to scenario where a company's core asset is fundamentally destroyed, this situation appears closer to one where a business faces an external geopolitical overhang. Non-US markets are expanding rapidly, with expectations for over 50% growth in European storage by 2027, and significant orders are being secured in the Middle East and Poland. However, uncertainty remains high as the final policy details are unclear, and a key variable is the company's new solid-state transformer business for the North American cloud market, which could be affected by supply chain security concerns.
Where to begin assessing the path forward is to acknowledge that the high-growth, high-margin phase has concluded. The overseas storage market has entered a period of intensified share competition and a downward shift in the gross margin center of gravity. In the first half of the year, the company's storage revenue fell 13.18% year-on-year, and despite a 28% increase in shipments, the overall gross margin dropped by 7.49 percentage points due to rising costs and regional price declines. This is starkly contrasting with the industry's shipment growth of 83% to 93%, while the company's own shipment growth was only 28%, a discrepancy that has become a core reason for further downward revisions of expectations.
The market's reaction is also evident in fund flows. The number of funds holding the stock fell from 745 in the first quarter to 589 in the second, and it was removed from their top ten heavy holdings. The employee stock ownership plan is now underwater by approximately 36%, and the institutional view, as reflected by brokerage forecasts, predicts full-year storage shipments of over 65GWh, implying a significant acceleration in the second half.
The fall in share price has also raised the question of whether the market is overreacting. Some analysts argue that the direct impact may be limited because the restrictions primarily target grid-scale storage, leaving residential and commercial segments relatively safe. Others, however, believe the entire storage business could be affected. The company has stated that its equipment exported to the US does not have remote upgrade or communication functions, but without clear rules, ambiguity persists.
Historical precedents suggest three different outcomes for companies facing similar policy headwinds. In some cases, the core asset was directly deprived, leading to a fundamental collapse from which the stock never recovered. In others, the company lost sales temporarily but recovered after paying fines or making rectifications. A third category, where the business model is not fundamentally damaged and other global markets remain profitable but a geopolitical label depresses the valuation, is where this company appears to fit.
The company's management maintains a measured outlook, noting that a stable decline in gross margin "is not necessarily a bad thing" as it will avoid vicious competition and promote healthy industry development. They also acknowledge that the competitive landscape is intensifying, but they retain a brand premium of around 10%.
The stock price may not see a unilateral recovery until key marginal changes become clear: whether second-half shipments accelerate while maintaining profitability, the extent of the formal policy details' impact on actual business, and whether the new solid-state transformer can pass supply chain screening in North America to convert into actual orders. Whether the post-crash market presents an opportunity or the starting point for a value re-rating ultimately remains to be answered by time and industry validation.